Article / 06 January 2014 at 5:30 GMT

3 Numbers to Watch: UK services PMI, EU confidence, US ISM index

James Picerno James Picerno
editor/analyst /
United States

A blur of purchasing managers' indices (PMIs) will colour sentiment today, including the first look at the UK Services PMI for December. Later, we’ll see reports on the EU Sentix Investor Confidence Index and the ISM Non-Manufacturing Index for the US. Keep in mind that several revised December PMIs for economies across Europe are also scheduled for release, including the German Services PMI (08:53 GMT) and the Eurozone Services PMI (08:58 GMT).

UK Services PMI (09:28 GMT): Britain’s economy mounted a robust recovery in last year's second half, but the prime minister emphasised what he says is a precarious state of macro affairs in his debut message for 2014. “Our recovery is real, but it’s also fragile, and there are more difficult decisions ahead,” David Cameron warned last week. The degree of fragility is debatable, although today’s December update of the Markit/CIPS Services PMI will offer new context for evaluating Cameron’s comment.

David Cameron
Britain's recovery is real but fragile, says David Cameron. Photo:

In the previous release for November, the services sector softened by the most so far in the 2013 data. Nonetheless, the reading of 60.0 reflected “strong growth during November as incoming new business continued to rise at a rapid pace,” Markit noted. The positive momentum for the economy overall is expected to spill over into the new year, according to a new poll of economists. “UK growth should be strong in 2014,” a Credit Suisse analyst tells the Financial Times. “The speed-up of 2013 looks broad-based across sectors and sources of demand. The main reason to be optimistic is the shift in corporate mood.”

If the bubbly outlook is more than irrational exuberance, today’s PMI number should provide some supporting evidence for thinking that Britain’s recovery will endure if not accelerate in the months ahead. Given the elevated readings in recent months, there’s still room for this measure of the mood in the services sector to fall without signaling trouble ahead. As long as today’s number sticks close to 60, the bullish forecasts for the UK will continue to resonate in the financial markets.

EU Sentix Investor Confidence (09:30 GMT): Encouraging signs of recovery continue to dot the Eurozone’s macro landscape, but there’s still no shortage of troubling numbers either. Last week provides a fresh example of the mixed news. The final data on the Eurozone Manufacturing PMI for December reflected “the strongest growth in over two-and-a-half years,” Markit Economics advised. But the upbeat trend is tempered by the fact that private-sector lending dropped 2.3 percent for the year through November—the steepest annual rate of decline since the start of tracking Eurozone credit data in the early 1990s, according to Friday’s monetary report from the European Central Bank (ECB).

The ongoing decline in lending is a sign that Eurozone’s recovery is weak at best. It’s also a clue for anticipating that the ECB will keep interest rates low and perhaps announce new round of monetary stimulus at its monthly announcement scheduled for this Thursday. Meantime, today’s update will be closely watched for fresh guidance on investor sentiment. In the previous release, confidence weakened a bit in December, although it remained elevated compared with the first half of 2013. But with a tepid rate of growth projected for the Continent overall, uncertainty abounds about what’s in store for the new year. 

GDP growth for last year’s fourth quarter is projected to rise 0.2 percent for the Eurozone, or about half as much as the estimated rate in the October prediction, according to This year’s first-quarter outlook is a bit better, but the trend in the weekly nowcasts has been slipping on this front too. No wonder that economists are generally cautious. A new BBC survey finds that half of 28 economists polled think that the euro crisis is still a real and present danger. Today’s report from Sentix will tell us if the market is inclined to agree.


US ISM Non-Manufacturing Index (15:00 GMT): Last week’s December update on the ISM Manufacturing Index suggests that the sector continues to expand at close to the fastest pace since April 2011. The bullish close to 2013 in manufacturing implies that the momentum will spill over into the new year. But there may be a slight glitch: the services sector is losing altitude, or so the recent trend in the ISM Non-Manufacturing Index suggests.

In contrast with its manufacturing counterpart, the ISM services benchmark fell in November to its lowest level since June (53.9). Although the index is still well above the neutral 50 mark, the sector’s conspicuous deceleration suggests that the economy may hit some turbulence in the new year. Services claim a bigger share of economic activity versus manufacturing and so another soft number in today’s release would temper the news in last week’s cheery manufacturing data.

For the moment, it’s still premature to see the wobbly services trend of late as something more than noise. Fed Chairman Ben Bernanke thinks that US economic growth will accelerate this year. "The combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation bodes well for U.S. economic growth in coming quarters," he said last week in his last major speech as head of the central bank. But if today’s December number reveals another drop, the crowd may start to wonder if there’s another rough patch lurking in the first quarter. The market, however, expects some good news in today's release. The consensus forecast sees the ISM Services Index rising moderately to 54.8, based on the consensus forecast.





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